DAD: A Skilled Advisors for Reputable OTC Companies
The advisor's involvement with U.S. issuers is a pivotal component of OTCQX and is designed to bolster investor confidence in the quality of disclosure by OTCQX-listed companies.
It also ensures that emerging and small cap companies have a professional resource for guidance and advice on securities-related matters.
Although the DAD - Issuer relationship is a cornerstone for companies that list on OTCQX, it is important to note that the issuer and its management are ultimately responsible for disclosure.
DAD Letter of Introduction and Annual Update
The DAD letter of introduction and annual update is provided only to Pink OTC Markets after a review by the DAD of the issuer's disclosure to confirm an issuer's eligibility for OTCQX listing and compliance with the OTCQX rules and disclosure guidelines. This limited purpose is described in the OTCQX Rules, and is intended to preclude shareholder claims based on the statements in the letter and annual update brought by clients of the U.S. plaintiff's bar, but not regulatory investigations. However, there has never been a case decided on this issue; so, the legal effect of this preclusion has not been determined.
The DAD letter is a statement regarding the work performed by the DAD. The letter is not a guarantee of correctness of the issuer's disclosure. Pink OTC Markets' Guidelines for Providing Adequate Current Information are patterned after those requirements that an attorney ordinarily provides issuers in preparation of a disclosure document. The services provided by DADs should not involve a significantly greater expenditure of legal time and effort, or greater cost, than would ordinarily be involved in advising an issuer regarding its disclosure obligations under Section 13 of the Exchange Act.
Summary of DAD Review Responsibilities
- Confirm the issuer satisfies OTCQX requirements for initial and continued listing;
- Determine that the company has addressed the disclosure requirements set forth in the OTCQX Rules;
- Obtain and examine documents and other evidence that corroborates statements made by the issuer in connection with material contracts, officers and other insiders and issuances of stock;
- Provide professional review, not affirmation, of issuer disclosure;
- Provide an annual letter to Pink OTC Markets describing the review steps performed by the DAD;
- If the DAD is an attorney, the DAD is asked to provide the negative assurance that the DAD has no reason to believe, and has not been made aware while rendering its services, that the issuer's disclosure contains an untrue statement of material fact or omits to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading;
- If the DAD is a broker-dealer, the DAD is asked to state that the issuer's disclosure and its review would suffice to enable the DAD to file a Form 211 with FINRA;
- Assist and advise the issuer in satisfying the OTCQX disclosure requirements; and
- Assist management and boards discern what information is material and needs to be disclosed to investors.
